Value Unleashed

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14May 2015

8 Factors that Drive Business Saleability

Posted By: Paris Aden

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Comments: 1

Far too many business sale attempts fail. Estimates of the failure rate of business sale attempts are higher than 75% and tend to correlate inversely to the size of the business sold. Assessing the saleability of your business is an essential first step on the path to successfully realizing its value. In particular, it helps you objectively assess the likelihood that your business will be sold if you embark on the process. Ignoring this step is dangerous because attempting a sale and failing has heavy costs.

Your business is unique and its saleability requires a unique, objective assessment. There are eight attributes that drive the value and ultimately the saleability of your business:

Financial Performance: Has your revenue been stable? Do you have high margins? Is your business capital-intensive? How professional is your record keeping?

Growth Potential: How likely is the business to grow? At what rate?

Stakeholder Dependency: How dependent is your business on any one employee? Customer? Supplier?

Cash Generation: Does your business require significant working capital? Does it consume cash when sales increase quickly?

Revenue Quality: What proportion and quality of your revenue is automatic and annuity-based? How frequently do your customers pay you?

Competitive Position: How well differentiated is your business from its competitors? Is your position defensible?

Customer Satisfaction: How likely are your customers to re-purchase from you? How likely are they to refer you?

Owner Dependence: How would your business perform if you were unexpectedly unable to work for three months? How many of your customers do you know on a first-name basis?